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The paper investigates the role of bank lending in the monetary transmission process in the Netherlands. The Johansen approach is used to identify supply and demand relationships in the credit market, and it is concluded from the short-run dynamics that this market is demand-determined. In this way, an important identification problem of studies based on aggregate data is explicitly addressed. Results are consistent with earlier fundings that banks hold a buffer stock of securities which they use to offset monetary shocks. The main implication of the study is that a bank lending channel is not an important monetary transmission mechanism.

The relationship between stock prices and house prices is investigated by comparing different segments of the Dutch housing market. This connection is strongest for the most expensive segment, and is also related to homeowners' stock market exposure. These findings support the idea that equity is a determinant of house prices.

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